How to Brand a Next-Generation Product

Upgrades to existing product lines make up a huge part of corporate research and development activity, and with every upgrade comes the decision of how to brand it. Harvard Business School marketing professors John T. Gourville and Elie Ofek teamed up with London Business School's Marco Bertini to suss out the best practices for naming next-generation products. Key concepts include:

Companies often take one of two tacks in naming a next-generation product—the sequential naming approach or the complete name change approach.

Experimental research showed that each naming approach affects customer expectations. With a name change, research participants expected features that were distinctly different or new. With a name continuation, they just expected improved performance on existing features.

Companies must assess risk versus reward when branding a product upgrade, weighing the excitement generated by a new name against the danger of scaring away customers who worry that new features pose the threat of new glitches and a steep learning curve.

by Carmen Nobel

When Apple launched its latest iPad, experts and nonexperts alike expected it to be dubbed "iPad 3," a natural follow-on to the second-generation iPad 2. Instead, the company called the new iPad just that: "the new iPad." Observers debated whether this was lazy branding or a very deliberate effort to market the iPad as a sibling to the Mac. Macs keep their names with each successive upgrade, analysts noted, while iPhones sport sequential numbers and letters to indicate improvements.

“Consumers don't necessarily read specs to learn about new features, but they'll always notice a new name.”

Like Apple, most consumer-centric companies deal with the dilemma of how to brand the next- generation of an existing product. Product upgrades make up the majority of corporate research and development activity. That's why Harvard Business School marketing professors John T. Gourville and Elie Ofek were surprised to find a dearth of academic research on the subject. "There's a lot of research about new-product branding, but as best as we could tell, nobody had looked closely at the issue of how to brand a successive generation," Gourville says.

To that end, Gourville and Ofek teamed up with London Business School professor Marco Bertini (HBS DBA '06) to suss out the best practices for branding next-generation products.

"For managers, this is not a trivial decision," Ofek says. "Consumers don't necessarily read specs to learn about new features, but they'll always notice a new name. We thought we could come in and bring some guidelines and normative implications that were well grounded in academic research."

Many companies choose either the sequential naming approach (Sony's successive PlayStation, PlayStation 2, and PlayStation 3 video game consoles, for example) or the complete name change approach (Nintendo's Nintendo 64, GameCube, Wii). The professors conducted a series of experiments to determine when and why each approach made the most sense.

Brand Name Continuation Vs. Name Change

In one experiment, 78 participants considered a hypothetical scenario in which a well-known firm is preparing to launch a new version of its color printer. The participants, who were split into two groups, received a list of seven successive model names. For the first group, the entire series of printers was branded in a sequential fashion, from 2300W to 2900W. For the second group, the first four models were named sequentially—2300W to 2600W, but the last three models reflected a brand name change—MagiColor, MagiColor II, and MagiColor III.

Based on the names alone, on a scale of 1 to 7, participants gauged the likelihood of significant changes and improvements for each successive model. Even though participants had no information about the actual features of the products, participants predicted much greater change when the latest version was named MagiColor than when it was named 2700W.

"With a name change, participants tended to expect features that were distinctly different or new," Ofek says. "With a name continuation, they just expected improved performance on existing features."

“The perception is that if it's a brand name continuation, it'll be somewhat better than the previous model, but it won't be buggy and there won't be a learning curve.”

A follow-up experiment reversed the task. Participants learned that the firm Garmin had adopted a sequential naming approach for the first five generations of its in-car GPS receiver, from RoadRunner 610 to RoadRunner 650. Their task was to choose the more appropriate name for the sixth generation: either RoadRunner 660 or StreetPilot. In this experiment, the researchers varied the list of features for the new product. When the list only included improvements on existing features, 61.3 percent of participants choose RoadRunner 660 as the preferred name. But when the list included several new features, 65.7 percent chose the name StreetPilot.

While these experiments focused on high-tech equipment, the professors note that the findings hold true across many industries. "Take the movies," Gourville says. "In the Rocky series, you expect Rocky II to play off Rocky. But with James Bond movies, there's no reason to expect that the latest Bond movie [Quantum of Solace] has anything to do with the previous Bond movie [Casino Royale]. So it gives you added freedom. You can change who James Bond is—Sean Connery, Roger Moore, Timothy Dalton, Pierce Brosnan, Daniel Craig—without destroying the franchise… Whereas with Rocky, you're pretty much stuck with Sylvester Stallone."

Risk Vs. Reward

Companies also must assess risk versus reward when branding a product upgrade. On the one hand, changing the brand name may induce excitement among prospective consumers who value new bells and whistles over small improvements. On the other hand, customers may worry that new features pose the risk of new glitches and a steep learning curve. It's important for a firm to predict the likelihood of risk aversion in its branding decision. Sometimes this is an unpredictable matter of a consumer's individual personality; for every Cautious Carl in the world, there's a Risky Rita. But many times, it's a matter of the situation at hand.

Ofek cites the example of Intel, which in 2001 introduced a 64-bit processor called Itanium, indicating that the product was markedly different than Xeon, its 32-bit predecessor. These types of processors power huge computer servers, which play vital roles in companies' day-to-day operations. Servers are a major expenditure, and a faulty server can lead to a crisis. "Even though Intel promised that Itanium had backward compatibility with Xeon, IT directors really worried about it," Ofek says. "That created a real delay in purchasing for Itanium, which really never took off."

To illustrate this point scientifically, the professors conducted an experiment with 203 participants, who each were told to imagine that a close friend was getting married soon, and that the friend had asked them to photograph the ceremony as a favor. However, because their Ricoh camera had been stolen, they would have to buy a new one shortly before the event. Each participant had a choice: replace the camera with the exact same model that was stolen, or upgrade to the next-generation version that Ricoh had recently introduced.

All the participants received the same list of specs for both the old and the new cameras, including information on features such as resolution, memory, zoom, and motion sensor. But the researchers manipulated the experiment in two key ways.

In some cases, participants were told that they were among several people taking pictures at the wedding, indicating a low-risk situation because if one person's photos came out badly, another person's photos could pick up the slack. In other cases, they were told that they would be the wedding's sole photographer, a much higher-risk proposition.

Participants also learned that the stolen camera model, named FS-E40, was the fourth in a line of sequentially named products: the FS-E10 through FS-E30. While some participants learned that the next-generation model followed that pattern, the FS-E50, others were told that the new model had a new name: the Spectra.

As expected, participants in the high-risk solo-photographer scenario were more likely to choose the FS-E50 over the FS-E40; the sequential naming approach indicated small, manageable changes. Given the choice between the FS-E40 and the Spectra, however, they stuck with the FS-E40--presumably fearing the challenges of moving to a significantly new design, Gourville says.

“In the Rocky series, you expect Rocky II to play off Rocky.”

Participants in the low-risk scenario were much more likely to go with the new model regardless of whether it was called Spectra or FS-E50; given the choice of either new model, the low-risk set tended toward the Spectra.

"The perception is that if it's a brand name continuation, it'll be somewhat better than the previous model, but it won't be buggy and there won't be a learning curve," Gourville says. "With a brand name change, you infer that there may be a steep learning curve, and it may work differently from your previous camera."

Creative Sequences

A brand name change also comes with the risk of disappointing consumers who expect more from the product than they otherwise would have.

"If you're really just tweaking the previous generation of your product, it's probably much better to use brand name continuation than brand name change," Gourville says. "Otherwise people will be led to believe that there are massively new features in there, and you'll just lead them to disappointment."

On the other hand, a brand sequencing approach can be tricky in a crowded marketplace where competitors are using the same approach. No company wants to release Doodad 3 when its chief rival is launching Thingamabob 4, for fear of apparently lagging behind.

But there are ways around that.

For instance, Microsoft released its Xbox video game well behind Sony's PlayStation launch such that its second-generation Xbox competed directly against the third-generation PlayStation. Fearful of being perceived as a laggard, Microsoft chose the name Xbox 360—sneaking that "3" in there with the added promise of 360-degree comprehension, Gourville explains.

Microsoft also shows us that if a company switches from a sequential naming approach to a name change approach, it's perfectly OK to switch back. With its Windows operating system platform, the company succeeded Windows 98 and Windows 2000 with Windows XP and then the oft-criticized Windows Vista. And then came Windows 7. Windows 8, due out later this year, is still in development, but Microsoft has already confirmed its name.

"Windows 7 brought us back to the notion of sequential indicators," Ofek says. "Microsoft learned that when you break from sequential names, people often overemphasize the risk of significant change."

Readers: Have you encountered branding decisions of this type? How did you handle them? Let us know in the comments section below.

About the Author

Carmen Nobel is the senior editor of Harvard Business School Working Knowledge.

Ray

Very interesting. I look forward to continued thought on this topic especially given the rapid development and rollout cycles prone to arenas like Agile software methodology. As an interpolation of this research, combining an existing naming series with a new product identifier could be used to introduce a new product with a significant shift in product features in order to minimize concern of too much change for the Cautious Carl's while still signaling enough change to attract the Risky Rita's. The above discussion of Microsoft's Xbox ("Xbox" to "Xbox 360") might be a good illustration of this. Or, under this premise, the new camera in the example given in the article could have named the "FS-E50 Spectra" as a transitional bridge from the "FS" series to a newer and significantly improved "Spectra" series.

Kapil Kumar Sopory

Company Secretary, SMEC(India) Private Limited

This is a subject where case-to-case basis and not a tailor made solution has to be expected.
Lot of marketing research including exploring psyche and mental approach of the end users of the product is needed. In general, subsequent versions of a product with small improvements could be given sequential numbers but where the features change, a new name- almost similar to the earlier- may be a better choice.
The example of movies - Don 1, Don2; Housefull 1 and then 2, etc. can be quoted from India.
No producer would,however, venture, to change the basic name of standard products such as Lux but may say that the new one is New Lux or likewise.
Each case is a ticklish problem needing indepth thought to ensure nomenclature does not disturb the marketing cycle and spurt in sales is ensured.

Atul

MarketingCommunication, Atul Infomedia

Excellent. I think you pin pointed the "back of the mind" situation of the brand buyer. We, as a consultant to one of the UPS company, suggested the brand sequel and new brand name for their products, have faced similar situation. When our product was with the new name, our sales and marketing team has to put more efforts on explaining new features, but in case of sequel, there was generally used to repeat order from client, which results with minimum efforts.
In fact I realized that by only changing name, without a major technology change in the product, really increases the pressure on the marketing team.
Personally on the product buy, I always preferred Canon IXUS series sequel when we bought four cameras in a span of Two years. Then the back of the mind decision was based on "the learning curve" , so I afraid to even go for another series of Canon or Nikon camera.
Thank you

Jack Slavinski

Technology Consulting

It will be very interesting to see how firms continue to accelerate leveraging the opportunities that social media offers when it comes to branding considerations. It's a whole new era...

Anonymous

May "Spam" forever reign supreme in the branding Hall of Fame! My sympathies to the account rep. who recommends,
"New Spam".

Walt Pendleton

CEO, IRA Golf Systems, LLC

We recently launched a new company that manufactures inexpensive electronic golf training systems for putting. The product names are The Nside10 Caddytm for junior players, The Nside10 ProStroketm for the aspiring amateur and touring pro and a third product in R & D called, The Nside10 Signature Seriestm which is a custom made product based on the same platform.
My question, Do you think we should reconsider the last product's name on this product? Walt Pendleton
wkp@Nside10.com / www.Nside10.com

Anonymous

Relevant article on long established brands re-inventing themselves to appeal to younger demographic, for example, Wheat Thins: http://www.usatoday.com/money/industries/food/story/2012-04-27/old-brands-new/54632570/1

Lambros

Interesting.
You could also look into the car industry, especially in europe where they use a lot of numbering for different/new models vs. names for models.

Lambros

Bruce H

TechRoadmap Inc.

Certainly in the software space one expects reasonable continuity as version numbers increase but suspects a learning curve (or major feature differential) if the name changes.

One also expects (but may not always get!) backwards compatibility for version number changes but only hopes for such with a name shift.

A problem with renaming versions instead of sequential numbering is that, not surprisingly, you lose any knowledge of sequence.

If I have a software package that runs requires a particular OS or "above" (newer) I can tell that Windows 8 is newer than Windows 7. But what about my Mac - is Leopard "above" Lion? or Snow Leopard? or Mountain Lion?

Anonymous

Hi,

For a telecom company - the product was branded as "ABC", due to a change in the underlying platform, hosting the product, certain small features had to be changed, but nothing of significant value to the subscriber, buying it.

The challenge was whether to:
1. continue with the same brand name, OR
2. a slight change such as ABC+, OR
3. change it completely as XYZ.

Attached to it, was the issue, how to do market communication, in all these cases:
1. #1 could be confusing for subscribers
2. #2 seems the best option
3. #3 could be confusing for subscribers, as it did not offer them anything of value

Please comment ...

GILBERTO DIAZ

i think its a interesting research because many firms dont invert in this kind of studies and many times dont know the kind of costumers they have or their needs they have for example the experiment at the people they had to choose a camera taking account the diferent risks of the different case. a practice example i think when the cocacola company introduced coca cola zero the new product and the new name cause many expectations but when the customers probe the product dont have a good acceptation because not complying with their expectations

Alberto Z??iga

UNLA

This article I think it is a good contribution because now everything happens much faster talking about technology, this technological development always made ​​companies enhance the opportunities for their products, as well as the risk that their products even more successful or will decline.
When we see new products with the same name but which is 2, 3, 4, etc.. The client expects to see further improvements, but when the name changes completely client interprets it as something different. For example we see with the Nintendo Wii U, control is a tablet, Nintendo does not have tablets and phones like the brands mentioned, so I had to create a unique command. The name remains only add the U meaning "We and your".

rich

President, UR BlindSPOT

Interesting study. I would like to know if such a branding "strategy" is global, or a US mindset only.

Tathagat Varma

Blogger, managewell.net

Makes lot of sense. The product name is an extension of the product and in the age where average attention span for a consumer for any commercial is just a few nano-seconds (and a much lesser recall!), one needs to get it right. However, in case of consumer internet software like Facebook or Gmail or LinkedIn, there is no notion of subsequent or multiple versions - there is only one version of the software at any time, this is very different from the tangible products or even shrink-wrapped software like a Windows OS. Thus, naming that is not an option in the real sense.

Behshad Rais

Deputy General Manager

It was an interesting subject and i really enjoyed. I would like to put some comments as follows:
In the first place choosing the brand of your product depends on, which market are you in and what is your situation in the market compare to your competitors.
The reason that Apple didn't change the ipad and iphone name is because the feature of their products stills same (iPad 2 and New iPad, iPhone 4 and iPhone 4S) and they did just some minor changes, and since they are coming up with a new product almost twice a year, it's not recommended to go base on the sequential naming as we would have iPhone 12 within the next couple of years which doesn't sounds a proper name! But, if you compare the iphone 3 and iphone 4 you can see the features have been changed and no matter apple goes base on sequential naming or totally change the name but still consumers will check all the new futures for the new model whereas for the printer or ink or other products which have a smaller market share consumers may not go and check the new features of the product if it goes base on sequential naming. Moreover, if Apple changes the name of the product compare to sequential naming, consumers may have concern about the risk involvement of buying the pr
oduct with a new name as it is totally changed and consumer prefers to purchase after receiving feedback from market.
If you are not a market leader in your industry, to me it is better not to go for sequential naming as you do not have a substantial market share to follow your products daily ,and you should try to attract the customers by choosing an attractive name for your products all the time to pull the potential customers by the name in a way that customers give a try and check the features of the products.
Thank you.
Behshad Rais

Noaman

Product Manager

An interesting read, by all means and hold true where consumer is the decision maker in the buying process. However, in ethical consultative selling like Pharmaceuticals, it's limited in application.

Dr Ranjan Upadhyaya

Professor, Universal Business School, India

it work out with the types of the product and segmentation we are going to touch. Risk is always favorable in niche market

farhan

account manager, Adcom

the article is really worth reading had some interesting takeouts and understanding from it, however i have one concern the examples that have been discussed in this article are off more technical nature.

can the same approach be used in FMCG product, where you are bringing out a new and better product in the market, or may be a product extension.

Maria Watson

AssignmentHelpWorld

Thanks a lot Carmen for such a nice article on the next generation of technology. Its very true that development in technology will never last in the coming future but I believe that over dependency on technology can cause catastrophes in mankind. Although these new technologies are attractive and much faster but its better to stick to one rather than upgrading it any further.